Get instant access to this case solution for only $15
Sainsbury In Egypt Case Solution
Sainsbury’s move into Egypt was expected to be a catalyst for long term growth and lucrative profitability by the company’s management in the UK. The company, which was facing intense competition in its hometown, decided to expand to maintain its competitive edge. The decision to enter Egypt was based on a close analysis of the country’s potential through its growing population and a swift change in grocery shopping trends (Goffin, Lemke, and Koners, 2010). With the relative lower political and economic risk associated in Egypt, and with relevant expansion experience in the USA, the Sainsbury management was confident of success in Egypt. The success, however, faded as soon as it had begun. Though having a local partner, the company failed to foresee the dynamics of anti-western forces in the Egyptian market and faced declining profitability (Abougomaah, 2005). As a result, the company is faced with limited options about how to proceed. This report presents a brief analysis of the case, highlighting what went wrong and what could have been avoided through a more thoughtful judgment.
Following questions are answered in this case study solution
Analysis of Internal Environment
Analysis of External Environment
Applications of Theories and Frameworks
Conclusion and Recommendations
Case Analysis for Sainsbury In Egypt
2. Analysis of Internal Environment
An analysis of the company’s internal environment shows why Sainsbury entered the Egyptian market. An internal analysis of the company’s internal environment is done through the SWOT analysis (Gasparotti, 2009). For Sainsbury in Egypt, this section provides a brief SWOT analysis of the retail chain’s operations in Egypt.
The company had a strong brand name that it could leverage in the Egyptian food retail market. With success experiences of expansions of operations in the USA markets, the company felt confident in entering the Egyptian market where it saw a lot of future potentials. Moreover, since the company was a leading food retailer in the UK and had experienced mounting success in the USA, it was not short on the financial muscle to expand in Egypt. With a store opening every eight days, the company displayed its superiority in infrastructure building and resources. The products it offered were of high quality and attracted elite consumers. The international hype of the store also attracted other local consumers to step in and go through the purchase experience at a retail grocery store. Moreover, the localization of stores and cost effectiveness allowed Sainsbury to influence a higher customer base.
The company, though well equipped with the economics of the expansion, neglected the cultural differences that existed. Sainsbury management did not have the foresight of looking at any cultural differences that might have occurred. This is evident in the company’s discount policies, which failed to influence consumers’ shopping habits. Moreover, the company also hired expatriates instead of locals in the management hierarchy, which furthers the cultural differences between the lower staff hired, which was Egyptian, and the management. The potential forecast of the market was also faulty to an extent – though having large potential; the population of 65 million had a low gross domestic product (GDP) per head of about $1,300 – marking the country as largely being poor and disorganized.
The market was still large, and the food retail sector had not been explored to its full capacity. Sainsbury, having the first mover advantage, could develop the market and create a loyal customer base. The support of the local government could also be used for further expansions.
The growing local competition against Sainsbury, which also exploited the religious and political sentiments of the people to incite them against shopping at Sainsbury, was an increasing threat. Lack of social and educational development also posed as a probable threat to Sainsbury’s operations.
3. Analysis of External Environment
An analysis of the external environment allows the company to evaluate further compatibility in a foreign country about its internal strengths and weaknesses (Deac and Duna, 2012). This is done through the PESTLE framework, which is applied to the Egypt in this section, with context to Sainsbury.
The Egyptian environment was charged politically to a great extent because of its geographic location in the Middle East. The political system was civil though influenced strongly by theocratic laws. The country had a strong influence of Muslim clerics who were not for western companies and their offerings. Despite the fact that the formal government was supportive of Sainsbury’s operations because of the fact that it brought in a considerable amount of FDI, other political elements in the country failed to accept the development. However, the entry mode was easy for the retail chain where it partnered with the local Edge retail group.
The economic landscape of the country was on the brim of becoming better. The wealth was distributed amongst a few, and the majority of the masses comprised of the lower middle and the lower classes, which did not have the purchasing power to afford ‘luxury’ groceries. The low GDP of the country was unable to support its humungous population, characterizing Egypt as being an emerging market – which may have potential in the future if investments were made acutely in the present.
The social landscape was coloured to a large extent by the political situation and circumstances of the local region i.e. the Middle East. Moreover, the country was also socially under developed, with infrastructure being at its best in few cities, such as Cairo only. The rest of the country where a large size of the masses resided was deprived, uneducated for the most part and unstable with low levels of uncertainty avoidance. The trend to move towards grocery chains for food shopping was gaining momentum, but only amongst those who could afford it.
Owning to the depressed economic and social state of the country, the technological advances were also in a similar state. The country had not progressed towards channels of modern trade that included reliance on the internet for example. The country was also deprived of more developed retail settings that employed modern technology.
The legal environment of the country was weak as is seen clearly through the protests and attacks on Sainsbury’s stores in the country. The ale enforcement institution was corrupt and sided with the stronger political parties in the society. Moreover, as seen through the cartel formulation against Sainsbury, it is safe to state that there were no competitive regulations either.
Get instant access to this case solution for only $15
Get Instant Access to This Case Solution for Only $15
Save $10 on your purchase
Different Requirements? Order a Custom Solution
Calculate the Price
Related Case Solutions
Get More Out of This
Our essay writing services are the best in the world. If you are in search of a professional essay writer, place your order on our website.